New Overtime Wage Rules for White-Collar Employees

New Overtime Wage Rules for White-Collar Employees

3.06.2016

Overtime wages comprise one of the most potentially confusing topics for employers in the United States. Within this topic, there are factors that create even more complexity. Exemptions from overtime pay based on salary level, duties, and salary basis can be difficult for the average employer to keep straight, especially when those exemptions change. Last month, the U.S. Department of Labor issued new rules governing overtime exemptions as well as information about how those rules will continue to change over the coming years.

What Stays the Same

Fortunately for employers, there are a few rules that will remain unchanged under the new overtime wage policies. The primary one is the “duties” test for white collar overtime exemptions. The types of white collar jobs covered under the exemption policies are identified in the Fair Labor Standards Act (FLSA) and include certain administrative, professional, computer, and outside sales positions, as well as certain highly paid employees. These designations do not change under the new rules.

It is worth noting that another feature of the FLSA that will stay the same is the gravity of noncompliance with the overtime exemption rules. Employers that fail to follow the rules, either deliberately or through ignorance, expose themselves to fines, injunctions, criminal charges, and lawsuits from employees who have not been paid the appropriate overtime wages.

What Changes

The major change in the new DOL overtime wage rules is an increase in the salary levels for overtime exemptions. The adjustment aims to set the exemption threshold to affect the top 60 percent of earners (most white collar exemptions) and the top 10 percent (highly compensated earners). With this change, employers must reevaluate many employees who may now fall above or below the new exemption thresholds and alter overtime wage policies accordingly.

Another rule change involves the inclusion of bonuses, incentives, and other types of compensation when determining the salary level of an employee for overtime wage exemption purposes. These standards are quite complex and may present difficulties for the average business owner or manager.

When the New Rules Take Effect

There are a few important deadline dates to make note of in the new DOL rules. The first one is December 1, 2016, the date on which the rules take effect. By December 1, employers must be able to demonstrate that their overtime payment is in compliance with the new rules released on May 18 of this year. The relatively brief period of time between the announcement and the deadline for implementing the new rules makes it essential for employers to begin analyzing internal policies and making necessary adjustments as soon as possible. The DOL also strongly encourages clear communication with employees on the part of employers to explain the new rules.

The additional important deadlines mentioned in the DOL announcement are January 1, 2020, and every three years following. On those dates, the overtime wage exemption salary thresholds are scheduled to change again in order to stay in line with the top 60 percent and top 10 percent of earners.

What it Means for Employers

A major change to the rules of the FLSA, especially with a tight deadline later this year, can mean serious problems for a business that feels it already has its hands full staying in compliance with current rules. Instead of spending time learning about the new rules and determining how they apply to the business’s employees, a company can entrust the process to a Professional Employer Organization (PEO). A PEO such as Complete Employee Services manages all of the client company’s payroll, records, and overtime topics, keeping the company up to date when new rules are announced. In the meantime, the client company can continue pursuing real goals and achieving real growth without stopping to learn and implement ever-changing overtime wage rules.

In addition to guiding a company through large-scale changes, a PEO handles the day-to-day payroll topics that have the potential to bog down managers and cost the company money through oversight, poor pay records, or deliberate “playing the system” by unscrupulous employees. To give your company an efficient, expert, and powerful human resources department, contact Complete Employee Services and find out how to get started.

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